The poisoned chalice of optionality rears its ugly head as the AliBaba IPO approaches launch and Hong Kong wrestles with minority shareholder rights in its wake while through train testing goes well (albeit against a narrowing arbitrage window). Euroclear & Clearstream collateral compromise, NEPSE opts for complex/expensive solutions contrary to commercial logic. EU endeavouring to collectivise commercial activity as usual while there is lots and lots of Bitcoin and P2P news as the world progresses. GFI shareholder aims to block the CME takeover while US options market debate new rules to avoid out trade chaos…and more…
Meanwhile at the weekend, in an almost unprecedented move, the EU agreed a Foreign Affairs delegate who allegedly can hold up a map the right way round. Moreover, the new Council President is Donald Tusk, who I have discussed in an RT Op-Edge column published here.
Happy Labor day to all our American readers… happy scrolling one and all:
Europe’s two largest settlement houses have been told there must be no more excuses after they proposed a rescue package for a deal to enhance their interoperability.
A two-day test of trading systems linking the local market and brokerages with Shanghai’s stock exchange went “smoothly,” paving the way for further tests in coming weeks with the ‘through train’ expected to start in October, with no fixed date announced.
LME To Push For Reform After US Judge Dismisses Suits (subscription)
South China Morning Post
HKEx Update On Legal Proceedings – Regarding Alleged Anti-Competitive & Monopolistic Behaviour In Connection With LME Aluminium Warehousing
Official announcement pertaining to last week’s court actions plus an SCMP article:
The end of class action lawsuits in the United States against the London Metal Exchange (LME) will open the way for a long-promised reform of the aluminium warehousing issue and allow the bourse to focus on its expansion in Asia, according to brokers.
An LME spokeswoman told the South China Morning Post the London-based commodities exchange was pleased to have been granted immunity from the aluminium class action lawsuits and would continue to carry out its warehouse reform plans.
The strife arises from a revision of European Union trading rules on how providers of benchmarks should license their products to users. Responses to an EU consultation from May to August revealed how deeply the industry is divided.
PLY: As the ‘mainstream’ media pussies about reporting the opposing camps without comment, let’s endeavour to clarify the situation: The financially illiterate EU behemoth, is making a totalitarian power grab to collectivise the benchmark industry and make Europe a (more) backward shambles than it already is. Index providers and those who have created benchmarks have a right to licence their product freely, it’s part of copyright, which in and of itself grows a free society of property owning democrats. Anything else defeats core commercial principles, no matter what legalese is used to justify it. That the sell side will happily steal everybody else’s IP for their own profit is unsurprising. That certainly doesn’t mean such theft ought to be legalised.
The valuation difference between Chinese shares traded in Hong Kong and Shanghai narrowed to the least in three months after brokerages said the first full trial of the cities’ exchange link went smoothly.
Previously EI reported: August 28th that ‘Traders Predict HK-Shanghai Stock Link Will Take Off’. August 25th that, HKEx completed connectivity test for Shanghai-Hong Kong stock connect. August 20th that the Shanghai – Hong Kong ‘through train’ link will speed up reforms of China’s stock markets. August 11th that the first trial of the Shanghai-Hong Kong Stock Connect took place on the mainland.
PLY: Historians of the CME call this “the curse of the Diffs.” In the late 1980’s the CME developed a gorgeous little relative interest rate product which in itself exposed a lovely arbitrage window in the yield curve…until, that is, they actually launched the Diff futures (a lovely piece of product design at the time). As I recall, the window was closed before a Diff ever traded…
Hong Kong Seeks Debate On Dual-Class Shares After Losing Alibaba
Kana Nishizawa & Richard Frost – Bloomberg
HKEx is seeking views on loosening shareholder voting rules that spurred Alibaba Group to choose the U.S. for what may be the world’s biggest IPO this year.
The bourse issued a “concept paper” Friday about the possibility of allowing minority-control voting structures. Respondents have three months to answer questions including whether to allow dual-class shares or restrict them to certain industries, David Graham, head of listings at HKEx, said at a press conference yesterday. The bourse has “no view” on weighted voting rights, he said.
PLY: The last thing markets need are IPOs run by micromanaging sycophants who don’t understand pure shareholder capitalism! One shareholder one vote.
Chinese e-commerce giant Alibaba Group Holding Ltd. plans to launch its U.S. IPO early in the week of Sept. 8, as the company aims to complete its months long dialogue with U.S. regulators. A launch that week, kicking off a deal that could raise more than $20 billion and be the world’s largest in years, would mean Alibaba shares could begin trading as soon as Sept. 18 or 19 in New York.
EI reported on July 18th that Alibaba’s hotly anticipated IPO – which is expected to be among the largest ever stock market listings – will not come until after the US Labor Day holiday on September 1. EI also reported on June 27th that ‘Alibaba Picks NYSE For U.S. IPO’.
HKEx Asks China For Time To Implement Tax Rules On Cross-Border Deals
Ssikat Chatterjee – Reuters
Hong Kong’s stock exchange (HKEx) has asked Chinese regulators to give investors time to adjust to any tax rules agreed upon as part of a closely watched cross-border share trading scheme, two people briefed by the city’s stock market operator said. Foreign investors are concerned that the new tax rules could come into force immediately after the scheme is launched, allowing them no time to make the necessary adjustments. There are also worries that the Chinese authorities would apply any taxes retroactively.
GFI Shareholder Sues To Block CME Acquisition
Chris Dolmetsch – Bloomberg
CME Group’s (CME) $580 million acquisition of GFI Group (GFI) undervalues the trading company, a shareholder said in a lawsuit seeking to block the takeover.
CME owner agreed in July to buy New York-based GFI to expand into European energy trading. The transaction calls for Chicago-based CME to sell GFI’s wholesale brokerage and clearing unit to a group of managers led by Michael Gooch, GFI’s executive chairman, for $165 million plus the assumption of $63 million in liabilities.
PLY: Case is Suprina v. GFI Group Inc., 652668/2014, New York State Supreme Court, New York County (Manhattan) and essentially the plaintiff argues the price undervalues the shares and the sales process was likely driven by the personal interests of Mickey Gooch and other management. One knee jerk part of my psyche sympathises here but then again the 46% premium CME is paying strikes me as a pretty good upside on a company which:
1) was being shopped with gusto for months as Gooch sought a deal to perpetuate the business;
2) was a business facing a challenging future;
3) has realised significant cash to help the entity endeavour to make it in SEF-world.
On balance, this is a tricky one, as without a deal where would GFI have been?
A. Presumably still in the valuation doldrums and unloved by shareholders, precisely as it was.
Perhaps one can argue the deal was nuanced to promote Mickey Gooch’s interests but then again one might be tempted to argue that the US is a nation where opportunistic shareholder lawsuits have in the past been used as an attempt to lever a better deal for stockholders…
The manager often called the attention of the clerks when any disagreement led to heated conversation. It was all part of the daily six-minute clearing procedure, first established in New York in 1853. Clerks from 60 banks tried to confirm payment obligations. Clerks inside a ring shuffled past clerks outside it. Inside clerks reported the total payment their bank owed to the bank of the outside clerk.
PLY: An elegant and thought provoking read.
U.S. Options Exchanges Craft Rules To Fend Off Turmoil
John McCrank – Reuters
A year after Goldman Sachs bungled a software upgrade and lost tens of millions of dollars from unintended trades, the 12 U.S. stock options exchanges have crafted new rules for dealing with erroneous transactions.
Under the proposed rules, unintended trades placed by professional traders will usually have their prices adjusted to levels as close to their fair market value as possible, while wrong trades by retail customers will be mainly be undone, five sources with knowledge of the matter.
PLY: I don’t want to comment as the snippets can be highly misleading in leaks but what is clearly required is an end result which:
1) makes the perpetrator pay for their mistake, both in terms of pure mercantile losses and also fines for abusing the market and wasting everybody else’s time / creating uncertainty etc;
2) ensures participants bulk up on internal systems to manage their risks before letting trades “into the wild;”
3) creates as small a footprint as possible on the exchanges and thus all market participants from being inconvenienced (in any way) by the incompetence of culpable parties, or having to upgrade their systems to deal with the failings of others.
When in doubt, I still like the way China approached the EverBright errors with penalties reported last Labor Day. Brutal but then again it did seem to deliver a remarkable period of ostensibly error-free trading.
Australian Securities Exchange (ASX) has appointed leading Customer Experience Agency MercerBell as its full service agency.
PLY: Presumably “full service” includes trying to make it look as if ASX actually has a plan beyond cost cutting and relying on the government as a security blanket to deliver an expensive, inefficient protectionist monopoly to Australian capital markets?
Nepal Stock Exchange (Nepse)’s plan to upgrade its trading system may finally materialise as it has called for request for proposal (RfP) from the three short-listed firms that had submitted their expressions of interest (EoI) to facilitate the process as consultants. The three short-listed firms being asked to submit RfP include Daiwa Institute of Research Ltd, The International Securities Consultancy Ltd, and Korea Exchange.
PLY: One of the saddest issues in the exchange world is the deranged way the consultant-government-oligarchy nexus ends up complexifying the simple. Quite why such leviathan organisations such as Daiwa and KRX are involved in a tender for a market which merely needs a modest upgrade (all parts available on the shelf) to its existing COMDAQ infrastructure demonstrates everything wrong with the world of government. If the process is merely left to these three ‘ top tier’ applicants then clearly the people of Nepal are not receiving adequate value as much much cheaper more suitable options exist to deliver the required infrastructure to this micro market. No wonder crowdfunding is growing – that’s actually what Nepal needs, not a hugely over-engineered stock market leviathan. A big fat fail looms in the Himalayas.
NSE To Develop More Transparent, Accessible Market
Helen Oji – All Africa
The Nigerian Stock Exchange (NSE) has reiterated it commitment to continue to execute key initiatives targeted at developing a more transparent, liquid and accessible market.
The UAE’s Nasdaq Dubai is expected to ink an agreement with Egypt’s Misr for Central Clearing, Depository and Registry (MCDR) early this month, under which companies listed on both stock exchanges will be allowed to dually list their shares.
Korea Exchange (KRX) decided to implement “after-hour market reshuffling and volatility interruption (VI)” with effect from September 1 since related regulations and enforcement rules on the KOSPI and KOSDAQ markets that are required for implementation were amended on June 18 and June 24, respectively, and IT developments needed for implementation had been completed.
5 US States Poised To Promote Bitcoin-Friendly Regulation
Daniel Cawrey – CoinDesk
EI reported on July 18th that Benjamin M. Lawsky, Superintendent of Financial Services, announced that the New York State Department of Financial Services (DFS) has issued for public comment a proposed “BitLicense”.
PLY: Texas, New Mexico, New Hampshire, California and Colorado are in the forefront of the vogue for a brave new world of opportunity while New York lags back in the old world of innovation-crushing red tape currently.
Ecuador Heralds Digital Currency Plans
Gonzalo Solano – ABC News
Ecuador is planning to create what it calls the world’s first digital currency issued by a central bank, which some analysts believe could be a first step toward abandoning the country’s existing currency, the U.S. dollar. The electronic money, which Central Bank officials say they expect will start circulating in December, does not have a name and officials would not disclose technical details, though they said it would not be a crypto-currency like Bitcoin. The amount of the new currency created would depend on demand.
EI reported on August 06th that ‘Bitcoin-Like Money Is Ecuador’s Latest Dollar-Saving Plan.’
3 Forces Shaping Next-Generation Bitcoin Exchanges
Stan Higgins – CoinDesk
In the aftermath of Mt Gox’s much-publicized collapse, a new breed of exchanges has moved to fill the vacuum previously occupied by what was once the most popular bitcoin exchange.
PLY: Exchanges are making progress although there is still much to do and it may only be a third generation of exchanges which actually works in the broader sector…
SpectroCoin Takes On BitPay In Europe With Bitcoin Processing Solution
Pete Rizzo – CoinDesk
SpectroCoin has launched a new bitcoin merchant processing solution for the European market, adding yet another vertical to its suite of products.
PLY: Endeavouring to become a European answer to Coinbase.
UAE’s First Bitcoin Exchange Launches In Dubai
Jon Southurst – CoinDesk
Multinational bitcoin exchange igot will launch the first bitcoin exchange in the United Arab Emirates (UAE).
The Australia-based company’s founder Rick Day says the new exchange will operate with a Commercial Brokerage License, approved by the local government. It has also secured local banking partners for direct deposits and withdrawals in UAE dirhams (AED).
Bitcoin Could Be Considered Legal Tender, Australian Tax Official Says
Paul Farrell – Guardian
The Australian tax commissioner has left open the possibility that the digital payment system bitcoin could be considered legal tender in Australia.
New Xapo Deposit Feature Lets Users Buy Bitcoin Via Wire Transfer
Nermin Hajdarbegovic – CoinDesk
Bitcoin service provider Xapo has launched a new feature that enables users to purchase bitcoins directly from the company.
Meet The British Crown Dependencies Vying To Become Bitcoin Island
Joon Ian Wong – CoinDesk
Bitcoin entrepreneurs seeking a friendly jurisdiction for their business could do worse than end up on the Isle of Man, the picturesque British Crown dependency located in the Irish Sea.
The island’s government has been quick to embrace cryptocurrency companies, by offering a regulatory environment friendly to digital currencies while promoting other initiatives to encourage cryptocurrency startups to set up shop there.
PLY: The excellent offices of the Isle of Man are open for business in Bitcoin and a splendid support network already exists for the development of unique cryptocurrency climate given their existing network of banks and financial services alongside state of the art data centres…plus the world’s greatest motorcycle race and terrific rallying. How much more civilisation can you get onto such a picturesque island I wonder…
Chinese Exchanges Setting New Transparency Standard As Huobi Audit Reveals 100% Reserves
William Suberg – CoinTelegraph
Chinese crypto exchange Huobi has joined the country’s elite league of those to pass the proof-of-solvency audit. The results carried out by Ripple CTO Stefan Thomas were posted on Bitcointalk, and showed that Huobi had reserves of 103.52% at the time of completion. “The actual holdings were 3.52% higher than the required holdings, meaning Huobi had greater than 100% reserves at the audit block height,” Thomas confirmed.
Special Section: FTI, NSEL, India at the Crossroads
PLY: MCX and FTIL are flat today.
NSEL Scam: Borrowers Routed Rs 4,000-Crore (USD 661.42 mln) Loot Into Real Estate
Nauzer Bharucha – Times Of India
A list of the 150 properties attached by the Mumbai police’s EOW in the NSEL scam case has been obtained by TOI. “Several of these attached properties were purchased by the defaulters with the money raised from the 13,000 NSEL depositors,” said an EOW officer on condition of anonymity.
The Rise & Fall Of Jignesh Shah
Salil Panchal & Pravin Palande – Forbes
The 47-year-old entrepreneur, who had taken on institutional forces such as the National Stock Exchange with his commodity exchanges…this is his story….
FxPro Group has launched its own proprietary browser-based trading platform that allows clients to trade using their MT4 accounts. By logging into FxPro WebTrader with only their FxPro Direct login details, clients can access all their MT4 accounts, real and demo and switch between them without re-authenticating or reloading the page.
NBHC Moves Technical Data From FT’s Server
Dilip Kumar Jha – Business Standard
Within four months of acquisition by private equity player India Value Fund (IVF), National Bulk Handling Corporation (NBHC) has shifted its technical database including emails, front-end and back-end information systems, from its erstwhile promoter FTIL to its own server.
Malfunctioning Bitcoin Trader Bot Causes Extremely High Volume On Bitcoin Exchange BTC-E
Kyle Torpey – Cryptocoins News
Another day, another bit of unusual trading activity on a Bitcoin exchange. As the Bitcoin price began to drop around 1 AM EST last night, at least one trading bot on BTC-e began to make some interesting trades. It seems that the trading bot has been caught in an endless loop, as it continues to either trade back and forth with itself or with other bots on the exchange.
Buyside Wants More Algo Transparency, Better Look At Data
John D’Antona Jr. – Traders Magazine
Institutional investors want to know in more detail than ever how their brokers’ and providers’ electronic trading tools work – from the moment the trader clicks on the algo from his order or execution management system on his desktop to the confirmation of the execution.
PLY: The noose has tightened on the neck of the buy-side for whom traditionally ‘best execution’ was little more than ensuring they gave enough business to certain houses to pay for their research. Now the traditional houses are indulging in welcome research (driven by regulatory concerns) to truly deliver best execution for their customers. That can only cause a lot of angst amongst some sell-side participants as their ability to deliver a service has not always been firmly aligned with the clients’ best interests.
ABN To Shift Retail Options Trades From Euronext To Rival Tom (subscription)
Philip Stafford – Financial Times
ABN Amro is set to further shake-up the Dutch options market by diverting the options trades it executes for retail customers from Euronext to The Order Machine (Tom), an emerging trading venue.
PLY: A little bit of seismic activity was witnessed Friday in the generally not so volcanic lowlands. This is more very encouraging news for NASDAQ”s investment in Tom. Bad news clearly for Euronext.
The swap future will list on the Deutsche Börse-owned derivatives exchange. US patent numbers listed on the product specification are assigned to Goldman Sachs, with managing director Oliver Frankel listed as the inventor.
Exchange of Moscow of Russia is making moves, released new specifications that shall enter into force on 8 September for payment in cash, EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CHF, USD/UAH, USD/RUB and future EUR/RUB.
Buysiders Avoid SEFs With Non-Standard Swaps
Mike Kentz – IFR
Up to three-quarters of interest rate swaps executed by US buy side firms are being structured in a way that avoids Dodd-Frank requirements for trading standardised derivatives on exchange-like platforms.
Through forward and backward-starting structures whose terms reference maturities just a few days or weeks off the standard benchmark tenors, the majority of dealer-to-client interest rate derivatives activity continues to be executed on an OTC basis some six months into mandated trading of standardised contracts on swap execution facilities.
PLY: Hmmm, rumours swirl that the sell side is doing a lot to keep order flow off the SEFs and protect the cosy monopoly whose time has now passed. The sell side only discredits itself further with such tactics but of course the banks spend so much money on regulatory lobbying that hey presto they often manage to skew rules to their advantage – the political regulatory complex needs to act to ensure fair markets.
TAIFEX To Launch Yuan-Denominated Futures In Europe
Taiwan Futures Exchange (TAIFEX) will launch Chinese yuan-denominated futures products on Eurex.
EI reported on January 6th that Eurex Acquired a Stake of 5% In TAIFEX. EUREX already trades KOSPI futures on its platform for the European market.
New RepoFunds Rate Index Launched
Icap Information Services (IIS) and MTS are expanding the RepoFunds Rate indices to include RepoFunds Rate Euro (RFR Euro), a daily repo index for Eurozone sovereign bonds. The new index gives euro cash investors, treasurers, bond traders and bond investors a benchmark for the whole Eurozone backed by over $200bn in cleared transactions collateralised with sovereign bonds.
“RFR Euro is an important addition to the RepoFunds Rate index family. By providing a broader measure of the cost of financing sovereign bonds from issuers in the Eurozone, it complements the existing country-specific RepoFunds Rate indices,” said Robert Walton, director of index services at Icap Information Services.
PLY: a neat new index – how many such new products would we see being innovated if they were subject to an enforced collectivisation by the EU’s regulatory interventions (as discussed above)?
New Moscow Free Float Methodology Comes Into Force
A new version of the MOEX Free Float Methodology came into force on 29 August, providing for limitation of the free-float coefficient for stocks added to an index for the first time in order to avoid imbalance between the stock”s weight in the index and its liquidity. Moscow Exchange”s index constituent lists, which take effect on 16 September, will be formed in accordance with the new methodology.
The new methodology is available here.
Channel NewsAsia reported that Diversity Action Committee (DAC – an initiative to get more women on to Singaporean boards) will be headed by Singapore Exchange CEO Magnus Bocker, and Speaker of Parliament Mdm Halimah Yacob will be its Adviser.
MV reported that Martin Murphy, Associate Regional Director for Examinations in Securities and Exchange Commission (SEC)’s Los Angeles office, is retiring after more than 36 years of public service, including 24 years at the SEC.
SZSE Gets New Chairman
The State Council, China’s cabinet, appointed Wu Lijun to head the Shenzhen Stock Exchange (SZSE) on Monday. Wu Lijun, who previously served as assistant to Xiao Gang and as member of the CSRC Communist Party committee, said he would assist in the development of listed companies, power the growth of various boards and promote the reform of the NASDAQ-like ChiNext small cap growth board.
The board of MCX has proposed to elevate Praveen Kumar Singhal, currently Executive VP, to the post of joint MD in light of his taking the “onerous responsibility to oversee the day-to-day operations of the company, in the absence of an MD & CEO”
EI reported on August 22nd that MCX is considering elevating the interim CEO Praveen Kumar Singhal to Joint MD for a period of three years.
Kuwait is replacing the head of its securities regulator after a stormy four years during which he drew criticism from some investors for his attempts to clean up the bourse and for the stock market’s weak performance.
New Fetco CEO Vows To Raise Stock Market’s Image
Darana Chudasri – Bangkok Post
Voravan Tarapoom, the newly appointed Chairwoman of the Federation of Thai Capital Market Organizations (Fetco), has set her sights on rebuilding the stock market’s image so that it is regarded as an investment venue for all people, not a casino. Mrs Voravan, who is also CEO of BBL Asset Management and Chairwoman of the Association of Investment Management Companies (AIMC), will take over from Paiboon Nalinthrangkurn, whose two-year term ends on 31st August.
TMX $0.40 quarterly dividend payment
Record date ASX 89.9c dividend
BGC Partners $0.12 quarterly dividend payment
FTIL Rs. 2 interim dividend payment
All forthcoming exchange / investment related events are now listed on our Events page.
Interactive Brokers Group SVP Milan Galik sold 1,800 shares Thursday, August 28th at an average price of $23.54 (bargain $42,372.00). He now owns 732,017 shares. Mr. Galik’s regular sales are chronicled on this specific page.
LSE Xavier Rolet, CEO, sold post-exercise 161,191 shares Wednesday (bargain $5.436 mln) 27th August at a price of 2034.10p ($33.73). He now holds 370,818 shares.
NASDAQ OMX Group CEO Robert Greifeld sold 60,000 shares Tuesday, August 26th at an average price of $43.65, (bargain $2,619,000.00). He now owns 844,551 shares.
South African P2P Lender Expands Into Small Business Loans
JD Alois – Crowdfund Insider
According to a recent report RainFin, a p2p lender owned in part by Barclays, is broadening its reach to include small business loans.
Malaysia Proposes Regulatory Approach For Equity Crowdfunding
JD Alois – Crowdfund Insider
Malaysia, has released a consultation paper on equity crowdfunding. The document has been entered for discussion and is accepting comments until September 5th. The document from the Securities Commission Malaysia (SC) does not touch upon Rewards / Donation based crowdfunding nor p2p lending. It’s sole focus is the regulatory approach towards equity crowdfunding.
RateSetter CEO: London Can Be The Center Of FinTech
JD Alois – Crowdfund Insider
RateSetter CEO and founder Rhydian Lewis recently posted his views on the status of London in the emerging world of financial innovation. RateSetter is one of the fastest growing P2P platforms in the UK and is expanding into Australia.
Indiegogo Teams Up With Chicago-Based 1871; Announces New Midwest Satellite Office
Samantha Hurst – Crowdfund Insider
Earlier this week, Indiegogo announced it will be opening a brand new Midwest satellite office in Chicago’s 1871. The organizations revealed they are teaming up to host a quarterly education session for those working in the building.
Crowdcube Accepting Applicants For Accelerator Program
JD Alois – Crowdfund Insider
Equity crowdfunding platform Crowdcube is now accepting applicants for its accelerator program. The program is looking for companies that expect to raise capital in the next few months. Selected companies will get assistance in prepping their business to become investment ready – and of course an opportunity to list on Crowdcube.
Energy Firms Face EMIR Confirmation Challenge
Stella Farrington – Risk
Many smaller energy firms will struggle to meet a new deadline on trade confirmations for over-the-counter derivatives, which takes effect from September under the European Market Infrastructure Regulation (EMIR), say consultants and market participants.
This is raising fears that smaller energy firms may be effectively excluded from trading with larger, more sophisticated counterparties.
HKEx CEO Charles Li – Latest Charles Li Direct
HKEx Chief Executive Charles Li has published a new blog to share some personal observations on the Concept Paper on weighted voting rights.